Drug companies to pay $25.2 million back to state in Medicaid pricing fraud cases

Five pharmaceutical firms have agreed to a combined $25.2 million settlement stemming from Attorney General Buddy Caldwell's lawsuits accusing several firms of defrauding the Louisiana Medicaid program with dishonest pricing schemes. The companies are: Actavis Inc., Boehringer-Ingelheim, Dey Pharma, GlaxoSmithKline and Schering-Plough Corp.

Attorney General Buddy Caldwell

The settlements, which range from $3 million to $10 million per company, end the state's claims against the companies, though Caldwell is still pursuing action against scores of additional defendants.

"Fraudulent over-pricing and marketing of prescription drugs caused Louisiana taxpayers and the Medicaid program to grossly over-pay for those prescriptions," Caldwell said in a written statement announcing the agreement. "Pharmaceutical companies who do this will be held accountable."

Medicaid, the state-run insurance program financed mostly by the federal treasury, pays drug suppliers based on a cost calculation called the "average wholesale price." Many states and the federal government are engaged in lawsuits that accuse wholesalers of manipulating or falsifying their AWPs, thus inflating their Medicaid reimbursements.

The individual settlements are as follows:

Actavis Inc., a U.S. subsidiary of the Swiss Actavis Group: $2.975 million to the Louisiana Department of Health and Hospitals for Medicaid restitution under the Medical Assistance Programs Integrity Law; $1 million to the Louisiana Department of Justice under the state's Unfair Trade Practices Act; $25,000 to the Joint Fraud Fund, which the two agencies use to pursue fraud cases.

Boehringer-Ingelheim, the U.S. arm of an international conglomerate based in Germany: $2.25 million to Medicaid; $1 million to Caldwell's department; $25,000 to the fraud unit.

Dey Pharma, a subsidiary of Mylan Inc. of New Jersey: $2.375 million to Medicaid; $600,000 to Caldwell's department; $25,000 to the fraud unit.

GlaxoSmithKline, an international firm based in Britain; $8.95 million to Medicaid; $1 million to Caldwell's department; $25,000 to the fraud unit.

Schering-Plough Corp., a New Jersey firm which is now merged with Merck & Co.: $3.975 million to Medicaid; $1 million to Caldwell's department; $25,000 to the fraud unit.

The GlaxoSmithKline settlement includes a yet-to-be calculated amount that the state health agency will pay to federal Medicaid accounts. The other four firms settled separately with the federal government.

In 2010, Caldwell filed suit against 18 companies, including five Louisiana firms. The suit, State of Louisiana vs. Abbott Laboratories, now includes more than 100 defendants. Caldwell's initial filing alleged that some average wholesale prices were as much as 6,000 percent higher than the drugs' true cost. Last year, he added a second suit: State of Louisiana v. McKesson Corporation.

The cases and related fraud investigations have yielded $138 million in payments back to the Louisiana Medicaid program, which serves about 1.2 million people at an annual cost approaching $7 billion. Drug coverage typically comprises about 15 percent of the total Medicaid budget.

Seeking leverage for additional settlements, Caldwell's office said it plans to push "several of the more than one hundred remaining defendants" to trial in the 19th Judicial District Court in Baton Rouge.